Why All These Plans For Tech Companies Killing Cable-TV With Internet-Based TV Are Doomed

As a result of my move, I had to sign up for a new TV-provider, and Internet-provider.

My new home opened up the option of either Verizon FiOS, Comcast, or Satellite for TV. I could also pick FiOS or Comcast or someone else for my Internet.

I thought to myself, "Great! Finally some competition; I can figure out who offers the best prices, and the best service."

So, I spend a Sunday afternoon crunching the numbers on each option, trying to figure out which combination of service providers would give me the best price and the best service.

What a waste of an afternoon.

After hours of tedious math, I eventually determined that what I wanted was going to cost $3,100 over a two year period at the high end, or $2,800 over a two year period at the low end. (For some context: I wanted to have DVR, and I wanted the package with the Golf Channel which kicked me into a higher service tier.)

The $3,100 option was DirecTV plus fast Verizon FiOS internet, the $2,800 option was FiOS TV plus fast FiOS Internet. I opted for the all-FiOS option. It wasn't just the price that made me pick FiOS, but it was the simplicity of an all-in-one provider. Plus, I got a little wigged out by satellite after my mom started telling me horror stories of people losing their signal in bad weather.

Why do I bring this up? Because, it's fresh in my mind as I read about the tech industry setting its sights on the pay-TV industry.

Intel, Sony, Google, Apple, and Microsoft are all working on various levels of disrupting the TV business.

Most of their plans remain secret, but from what's been reported, none of it sounds terribly revolutionary. It sounds like an incremental improvement on what already exists.

And, since it's going to be Internet based, it's going to require a pretty strong Internet connection, I assume. And, if it's Internet-based, it's probably going to slow down my web speed if I'm working and watching TV in the background. That doesn't sound good.

And, should Intel's TV service really become successful, then I'm hosed because Verizon will just bump its Internet price to offset the lost TV revenue.

Google has reportedly kicked around doing a web-based TV service. And Sony has also started securing rights for a web-based pay-TV service as well.

Presumably all of these services would offer better user interfaces and slightly better customer service. That's great, I guess. But it's not a big enough deal that I would pay a $300 or more premium over what Verizon charges for an all-in-one package.

Importantly, none of these sound like they're going to lower my monthly bill, or break up the bundles of channels I don't want. (They might even raise my bill as content providers find that they suddenly have new bidders trying to enter the TV market.)

As I read about these Internet-based TV services I just think that they're a newer version of DirecTV, which has had its success, but did little to really change the fundamental pay-TV landscape.

In each instance, the cable TV would be reduced to just a signal, and Apple and Microsoft could add their own software, bells, and whistles.

In some ways, it's like smartphones. Apple offers the software service, and AT&T offers the signal.

But, like with smartphones, it would require Apple or Microsoft, negotiating with every single pay-TV provider. Unlike with smartphones, though, the pay-out wouldn't be as great.

Televisions are lower margin business. They're also replaced less frequently. So, it's hard to know how much trouble Apple is willing to go through for that business.

Basically, I think we're kinda stuck. Companies like Verizon and Comcast will continue to dominate the pay-TV business.

However, there is reason for optimism.

Intel's TV plan could provide inspiration for the established companies to produce a better product.

And, companies like Netflix and Amazon, are providing real disruption to the traditional pay-TV businesses by offering high quality on-demand programming. As they become more and more successful, they can start securing more and more rights.

And if people start cutting the cord to use just Netflix or just Amazon, then eventually content and cable companies are going to have to figure out a more user-friendly solution to pay-TV.